Niu Technologies (NIU) Earnings Call Transcript & Summary

Good day, ladies and gentlemen. Thank you for standing by, and welcome to the Niu Technologies Second Quarter 2026 Earnings Conference Call. [Operator Instructions] As a reminder, we are recording today's call. If you have any objections, you may disconnect at this time. Now I will turn the call over to Ms. Kristal Li, Investor Relations Manager of Niu Technologies. Ms. Li, please go ahead.

Thank you, operator. Hello, everyone. Welcome to today's conference call to discuss Niu Technologies results for the second quarter 2026. The earnings release for our press presentation and financial presentation have been posted on our Investor Relations website. This call is being webcast from company's IR website as well and a replay of the call will be available soon. Please note today's discussion will contain forward-looking statements made under the safe harbor provision of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve risks, uncertainties, assumptions and other factors. The company's actual results may be materially different from those expressed today. Further information regarding the risk factors is included in company's press release with the Securities and Exchange Commission. The company does not assume any obligation to update any forward-looking statements, except as required by law. Our earnings press release and this call include discussions of certain non-GAAP financial measures and the press release contains a definition of non-GAAP financial measures and the reconciliation of GAAP to non-GAAP financial results. On the call with me today are our CEO, Dr. Yan Li; and CFO, Ms. Fion Zhou. Now let me turn the call over to CEO, Yan.

Hello, everyone. Thank you for joining our second quarter 2026 results call. So in the second quarter of 2026, we continue to execute our core high-quality resilient growth while navigating a profound structural adjustment in the domestic two-wheeler market and accelerating the strategic realignment of our international business. For Q2 2026, we achieved a total sales volume of 434,000 units, representing a robust year-over-year increase of 24%. So this expansion was provided by China sales reaching 400,000 units, up 26% year-over-year and overseas shipment scale to 32,000 units, up 3.6% year-over-year, signaling a steady operational recovery in the international business. Total revenue for the quarter reached RMB 1.44 billion, representing a year-over-year growth of 14.7%. Gross margin stood at 16%. This primary trajectory was driven by 3 main factors: first, the active promotional sales clearance and inventory write-off of our international micromobility business. Second, the structural product mix shift with the higher volume electric motorcycles in China, which carries a relatively lower margins compared to our historical premium e-bicycle segment. And third, ongoing cost pressure from elevated raw material prices. Crucially, those collective headwinds were partially offset by our ongoing components platformization and the commercial cost reduction initiatives. Now I would like to provide more details on our performance and strategic execution course across both China and the international market. First, let's talk about China market. In Q2 2026, the China sales volume grew 26% year-over-year to 400,000 units. This strong volume growth was achieved against the challenging regulatory and macroeconomic backdrop. Now with the full enforcement of new national standard for electric bicycles coupled with broader demand decline in the top-tier cities, the domestic 2-wheeler market is undergoing a significant structural transformations. Specifically, the premium E-bicycle segment, historically, our strongest category experienced a meaningful industry-wide contraction with the first half decline admitted between 25% to 30%. Concurrently, consumer demand has decisively expand towards electric motorcycles, especially in lower tier cities where the motorcycles have not been a category with lower average selling prices and the margins than the premium e-bicycles. We proactively reallocate our R&D and product resources in events aggressively pivoting towards a high-growth electric motorcycle segment. The structural momentum of electric motorcycle business is now directly offsetting the pressure in the premier e-bicycles, establishing a strong foundation for our next growth base. Now first, talk about the product portfolios. During the second quarter, our execution focused on decisive structurally engineering our product portfolios. In terms of electric motorcycles, the electric motorcycle category contributed approximately 60% of our China sales volume due to serving as a primary growth engine of our domestic business. We continue to strategically concentrate sources here, building our comprehensive product matrix across key consumer user bases. First, following the strong reception of Windstorm series, we spent aggressively with the N-Series, a high-performance model purposely built for delivery professionals and high-frequency cargo use. Delivering 0 to 50-kilometer power acceleration in just 5.4 second and top speed of 70-kilometer per hour and support for mainstream battery swapping. Priced at accessible RMB 3,399 which is a record-breaking online preorder of 32,000 units on its very first day. In April, we also launched next Marathon series to directly eliminate range anxiety and the charging onstream. Equipped with high capacity semi-Mpower battery, it delivers a verified full throttle range of 146 kilometers. In Q2 alone, the NX Marathon contributed 11% of our total domestic sales volume. Now building on this momentum, we further expand the line in July with the next 170 extending our price point coverage and solidifying our leadership in the family commuting segment. Now in terms of e-bicycle segment, we maintain a strong -- long-term commitment to a market where systematically strengthen our product matrix under the new national standard. First, we enhance our entry-level offerings led by the white series to effectively broaden the consumer access. Second, we are actively in the process of reintroducing key models in the RMB 5,000 to 7,000 price reach reestablishing our technological leadership in the premium e-bicycle space. Now while maintaining a prudent discipline during the current market condition, we're fully prepared to capitalize on market recovery when demand returns, leveraging our complete and diversified compliance portfolio. Now second, let me talk about R&D and technology. The technology and continuous innovation remains core to Niu's long-term strategy. Following our March vision announcement to redefine mobility and enter the era of AI-powered 2-wheel electric vehicles, we moved decisively in Q2 alongside leading technology partners to convert hardcore AI capabilities into tangible mass-market user experience. Core features, including the new AiOS, screen navigations, integrated triple camcorder system, AI Pets and AI voice interaction are now fully integrated across multiple mass production models. Our user data confirm those features are being frequently used. For example, in terms of our screen navigations, it reached approximately 190,000 monthly active users. Now adding to those technology momentum, our new official awards for interface and user experience design. This marks the first time in 2-wheeler operating system has received its international recognition, serving as a powerful global validation of our design and technological leadership. Now let me talk about the brand and marketing. On the brand front, we continue to execute our strategy of brand-driven growth, deliberately expanding Niu's position from a niche top-tier urban geek brand towards a broader mass premium market. We're driving a full funnel brand awareness and mainstream consumer acquisitions through a multi-touchpoint approaches. First, supported by our global celebrity ambassador large-scale brand campaigns, influencer content and user engagement programs. We're actively shifting brand perception from single brand recognition to a deeper consumer understanding and engagement. Second, we sustained a target brand visibility investment across 37 key cities, occupying high-traffic touch point, including outdoor digital screens, major transit hubs, cinemas and the central commercial district generating over 5.9 billion total impressions. And last, we successfully launched a targeted off-line community events such as Earth Day campaign that generated 250,000 exposures and also Shanghai Outdoor Exhibitions, which generated 3.25 million impressions. Now on the retail channel side, in light of broader market uncertainties, we focus on same-store sales increase and prioritize the operational health and the profitability of retail ecosystem. In terms of network footprint, by end of Q2, our store network stood at 4,570 stores nationwide with lower tier cities accounts for 36% of our total footprint. Now by concentrating our resources on empowering existing retailers, the same-store sales surged by 24% year-over-year, driving a consecutive operational efficiency gains across our store network. And we'll focus on online channels. The online channel delivered a standout performance and Q2 online sales grew by 50% year-over-year and accounts for 64% of our total domestic retail sales. Besides the traditional Tmall and JD.com, we also opened on Douyin powered by 9 official flagship accounts and 1,600 dealer-operated accounts. We executed 57,000 live streams and produced 90,000 short-form video clips in Q2 and generating over 720 million impressions. Now let me talk about the international business. In Q2 2026, the overseas sales reached 32,485 units, representing a 3.6% year-over-year growth. And this demonstrates our international business has steadily exited its structural adjustment phase to reenter the growth trajectory. Now first talk about the international electric motorcycle business. Our overseas electric motorcycle business maintained powerful momentum, delivered 4,800 units in Q2, a substantial year-over-year increase of 50%. This performance directly validate efficacy of our direct-to-retailer strategy. In terms of networks, our dealer network successfully expanded from 307 stores at the beginning of the year to 417 active locations by end of Q2. In terms of product mix, following the successful introduction of our high-performance models such as NQiX 500, NQiX 300, FX 200, the 125cc category has rapidly climbed to account for approximately 50% of our total European sales volume. So this premium mix optimization structurally led the gross margin profile and enabling our team to achieve a key milestone of local -- now in the emerging markets like Asia Pacific and other areas, we made steady progress through an asset-led profitability-first approach. And we have made a first approach, for example, Algeria with sales over 1,000 units and Thailand with sales over 1,000 units. Now we'll maintain this disciplined asset-light expansion models, first validate the product market fit and local profitability, then selectively scale into additional high-potential markets. Now in our micromobility business internationally, Q2 marked a successful completion of smooth channel transition, bringing the terminal sales velocity firmly back on the growth path. While the wholesale shipment reached 27,000 units, the end-user retail activation, which truly measure the organic consumer demand exceeded 36,000 units, representing a 21% year-over-year growth in Q2. And this activation trend accelerated month-over-month. For example, it grew at 21% in May and 37% in June, proving our inventory clearance initiatives are working effectively. And our promotional strategy for legacy models yield a highly positive results in terms of channel clearing. As anticipated, those inventory clearance program create a short-term compression on our micromobility gross margin, but we view this as a necessary prudent and deliberate investment to restore long-term operation path. Now look ahead, the second quarter in 2026 served as a pivotal period for deliberate operation adjustments. In China, our momentum was anchored by the rapid acceleration of our electric motorcycle category, which successfully offset market-wide regulatory and macroeconomic headwinds in the electric bicycle segments. Now moving into Q3, we'll continue aggressively into the electric motorcycle growth momentum. We're expanding into new consumer segments by launching a female-focused product lines while systematically deepen our market penetration with our Windstorm and Milestone product families. At the same time, while the broader market-wide recovery in electric bicycle depends on market conditions and consumer sentiment, we're taking proactive internal steps to structurally improve our revenue and ASP in the e-bike segment today. In Q3, we're reintroducing a refreshed lineup of mid- to high-end line e-bicycles, targeting the RMB 5,000 to RMB 7,000 price range. By upgrading our product mix with the premium features and advancing the integration of new AiOS and AI assisted riding features, we aim to lift our ASP and defend our margin profile while broader markets stabilize. On the channel front, we'll continue to amplify our online traffic generation across social commerce platform, driving public domain traffic directly into our retail store network to support the sellout across all categories. Now in the international market, our core electric motorcycle business will maintain a steady structural growth and our direct-to-retail strategy, leveraging the higher 125cc plus model penetration to lift the regional margins. Concurrently, our micromobility segment remains firmly on track with our distribution transition largely complete. The active promotion clearance in Q3 will bring the overseas inventory back towards a healthy normal baseline by the end of the year. So in summary, 2026 was an important year for structural transformation for Niu by capturing volume growth in electric motorcycle, reestablishing our premium edge e-bicycle and advancing our AI ecosystem and normalizing our overseas inventory while building a more resilient operation base. We remain disciplined and realistic about the market condition and the focused entirely on execution. Now I'll turn over to our CFO, Fion Zhou to talk about the financials.

Thank you, Yan. Hello, everyone. Please note that our press release contains all the figures and comparisons you need, and we have also uploaded Excel format figures to our IR website where you reference. As I review our financial results, I'm referring to the second quarter figures, unless I say otherwise, and all monetary figures are in RMB if not specified. As Yan just mentioned, our total sales volume for the second quarter was over 434,000 units, up 24% compared to the same period of last year. 402,000 units were sold in China, while the remaining 32,000 was sold overseas. Nearly 60% of our sales in China came from the top 5 best sellers. The total revenue for the second quarter amounted to RMB 1.44 billion, an increase of RMB 185 million or 15% compared to the same period of last year. China revenue were RMB 1.32 billion, accounting for 92% of total revenue. Of this, the scooter revenue were RMB 1.21 billion and year-year increase of 15% and this growth was primarily driven by the higher sales volume, but partially offset by the decrease of revenue for e-scooters. China scooter's ASP was RMB 3,010, down 9% year-over-year. And this decline in ASP was primarily attributable to a shift in the product mix with a higher proportion of the electronic motorcycles. During this quarter, these models were primarily sold within a narrow retail product range of RMB 4,500 to RMB 7,000, including the models such as FX, NX Windstorm versions. And this kind of shift towards models within this price range resulted in a lower ASP compared with the same period of last year. Overseas revenue was RMB 116 million, representing 8% of the total revenue. Scooter revenue, including electronic motorcycle, mopeds, kick scooters and e-bikes amounted to RMB 106 million, slightly increased from RMB 103 million in the same period of last year. and this increase was driven by the higher sales volume. The ASP of overseas scooters were RMB 3,270. Revenue from accessories, spare parts and services were RMB 124 million, a 29% increase compared to the same period of last year, mainly driven by the growth in new APP services and higher sales of accessory and spare parts in China market. The gross profit for this quarter was RMB 230 million, declined from RMB 252 million during the same period of last year. The gross margin was 16%, 4.1 ppts lower than the same period of last year, of which 2.5 ppt decrease driven by the change in the product mix and higher cost in China market and the rest of 1.6 ppts decrease due to the lower margin on overseas kick scooters. In China market, as mentioned previously, the electronic motorcycles accounted for a greater share of the domestic sales, and these models carry lower gross margins compared with the e-bicycle models. And meanwhile, higher product costs across the upstream supply chain put additional pressure on the domestic gross margin. And internationally, the inventory clearance of the kick scooters resulted in a lower margin, which also contributed to the overall gross margin decline. The operating expenses for the second quarter were RMB 341 million, increased RMB 76 million or 29% compared to the same period of last year. The OpEx ratio was 24%, up from 21% in the same period of last year, but down from 29% in the same -- in the last quarter. Selling and marketing expenses rose by RMB 36 million year-over-year to RMB 239 million. primarily driven by the increase of RMB 21.9 million in intensified marketing plan in the domestic market starting from the beginning of this year, including the e-commerce advertisement and branding. The RMB 12.2 million in depreciation and amortization expenses related to the new store expansion. Selling and marketing expenses accounted for 17% of revenue, up from 16% in the same period last year, but down from 20% in last quarter. R&D expenses increased by RMB 8 million year-over-year to RMB 52 million, primarily due to an increase in design testing costs as well as the staff cost. R&D expenses represented 3.6% of revenue compared to 3.5% in the same period of last year and 4.5% in last quarter. G&A expenses increased by RMB 31 million year-over-year to RMB 51 million, primarily due to the foreign exchange losses related to the remeasurement of the foreign currency-dominated assets, mainly the accounts receivable. At the overall earnings level, the impact of this foreign exchange losses were partially offset by the interest income. G&A expenses represented 3.5% of revenue compared with 1.5% in the same period of last year, but down from 4.7% in the previous quarter. Excluding the impact of foreign exchange losses, G&A expenses were RMB 32 million compared with RMB 44 million in the same period of last year. In the second quarter, we had a net loss of RMB 102 million with a net loss margin of 7.1% under the GAAP accounting compared to a net income of RMB 5.9 million with a net income margin of 0.5% for the same period of last year. And the non-GAAP net loss was RMB 98 million with a non-GAAP net loss margin of 6.8%. Turning to our balance sheet and cash flow. We ended the quarter with RMB 1.7 billion, increased RMB 36 million compared to the end of last year in cash, restricted cash, term deposits and short-term investments. Our operating cash was inflow amounted to RMB 392 million. The CapEx for the second quarter amounted to RMB 53 million, reflecting an increase of RMB 21 million compared to the same period of last year. And this can be primarily attributed to an increase in the opening of new stores and modules cost in China. And now let's turn to guidance. We expected the third quarter revenue to be in the range of RMB 1.86 billion to RMB 2.03 billion, an increase of 10% to 20% year-over-year. And please be aware that this outlook is based on the information available as of the date and reflects the company's current and preliminary expectations, which is subject to change due to uncertainties related to various factors. And with that, we'll now open the call for any questions that you may have for us. Operator, please go ahead.

[Operator Instructions] Seeing no questions in the queue, let me turn the call back to Dr. Yan Li for closing remarks.

Thank you, operator, and thank you all for participating in today's call and for your support. We appreciate your interest and look forward to reporting to you again next quarter on our progress. Thank you. .

This concludes today's conference call. Thank you for participating. You may now disconnect. Speakers, please stand by.